Division S of Kracker Company makes a part that it sells to other companies. Data on that part appear below: Division B, another division of Kracker Company, presently is purchasing 10,000 units of a similar product each period from an outside supplier for $28 per unit, but would like to begin purchasing from Division S.Suppose that Division S can sell all that it can produce to outside customers. If Division S sells to Division B at a price of $28 per unit, the company as a whole will be:

A) worse off by $80,000 each period.
B) worse off by $70,000 each period.
C) better off by $20,000 each period.
D) worse off by $20,000 each period.

Question

Division S of Kracker Company makes a part that it sells to other companies. Data on that part appear below:

Division B, another division of Kracker Company, presently is purchasing 10,000 units of a similar product each period from an outside supplier for $28 per unit, but would like to begin purchasing from Division S.Suppose that Division S can sell all that it can produce to outside customers. If Division S sells to Division B at a price of $28 per unit, the company as a whole will be:

A) worse off by $80,000 each period.
B) worse off by $70,000 each period.
C) better off by $20,000 each period.
D) worse off by $20,000 each period.

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